International shoppers help retail sector recover from the post-Brexit-referendum

UK retailers enjoyed consecutive annual increases in sales to international Tax Free shoppers for the first time in almost two years in March, with a steadier pound and therefore prices likely removing the uncertainty of the last two years for tourists.

The 1% year-on-year increase in sales across the UK followed a bumper 10% increase in February to mark the first consecutive monthly increases since July 2017.

The figures come from international payments company Planet, who facilitate VAT refunds for international shoppers, an indicator widely seen as an accurate proxy for the purchasing power of different nations’ tourists and the retail attractiveness of the countries they visit.

The value of the pound plummeted to a 31-year low immediately after the June 2016 Brexit referendum, and while the resulting more attractive pricing of British goods to international shoppers led to months of double-digit Tax Free sales growth, price differentials eventually caught up. What followed was a 16-month spell of often double-digit decreases in Tax Free sales from August 2017 to November 2018.

Since then, UK retailers have recorded Tax Free sales increases in three of the last four months of activity, suggesting that a full-blown recovery may be underway. Increases were aided somewhat by the coinciding Gilets Jaunes protests in France, which may well have convinced Francophile tourists to trade in the Champs-Élysées for Bond Street and Regent Street while Paris’ retail hotspots were disrupted.

The rebound looks set to continue, with data from ForwardKeys forecasting a healthy 5% increase in international visitors from April to June this year, a figure that represents a four-percentage-point improvement on the same period a year ago. This places the UK behind only Austria and Portugal as the most attractive European country for tourists over the next three months.

David Perrotta, UK country manager at Planet said, “The steadying of the pound appears to have elicited a sense of confidence among international shoppers, who are incredibly savvy when it comes to finding a good deal on luxury goods. The consecutive months of growth are a promising sign for retailers who understand the huge commercial opportunity that international shoppers represent.”

UK retailers can expect to see an uptick in Asian shoppers over the next quarter, with visitor numbers from Japan, Taiwan and China expected to increase by 23%, 17% and 16% respectively.

Public holidays in these countries are likely to be large drivers of international travel over the next few months. Chinese citizens are due to celebrate Labour Day and the Dragon Boat Festival, while Japanese nationals will be celebrating a host of national holidays, cumulatively known as Golden Week, in April and May, all of which are often marked by holidays abroad.

However, it is Vietnamese shoppers who are the sleeping giant in terms of sales opportunities for Europe’s retailers. The average spend (ATV) for these tourists in March reached a Europewide all-time high for Vietnam of €1,036, a dramatic difference compared with the traditional big-spending nations of the United Arab Emirates and China, who registered UK ATVs of €732 and €443 in March, respectively.

The ATV for Vietnamese shoppers has grown by 14% year on year for the past two years, seeing it climb from the 27^th highest-ranking country in terms of ATV in 2017 to 17^th in 2018.